<PAGE> 1
Variable Annuity
Equi-Select
PROSPECTUS
[ILLUSTRATION OF CLOCK]
May 1, 1995
Equitable Life Insurance Company
of Iowa Separate Account A
May 1, 1995
Equi-Select Series Trust
<PAGE> 2
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
SUPPLEMENT DATED SEPTEMBER 8, 1995
TO THE
PROSPECTUS DATED MAY 1, 1995
The following supplements certain information contained in the second
paragraph under "Highlights" on Page 2:
In the State of California, within thirty (30) days of the date of
receipt of the Contract by an Owner who is 60 years of age or older,
it may be returned by delivering or mailing it to the Company at its
Annuity Service Center.
The following supersedes certain information appearing in the
Prospectus:
Effective September 22, 1995, the Government Securities Portfolio and
the Short-Term Bond Portfolio are no longer available in connection
with the Contracts offered under this Prospectus.
<PAGE> 3
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
EQUI-SELECT SERIES TRUST
SUPPLEMENT TO PROSPECTUSES
The following supersedes certain information appearing in the
Prospectuses dated May 1, 1995, of Equitable Life Insurance Company of Iowa
Separate Account A and Equi-Select Series Trust. Except as otherwise provided
herein, all capitalized terms have the meanings set forth in the Prospectuses.
SUB-ADVISER NAME CHANGE
CS First Boston Investment Management Limited, manager of the
International Fixed Income Portfolio for the Equi-Select Series Trust, will
change its name to Credit Suisse Investment Management Limited ("CSIML")
effective June 30, 1995. The name change reflects the sale of the company by CS
First Boston to Credit Suisse. CSIML's ultimate parent company, CS Holding,
remains unchanged.
MANAGEMENT OF TRUST-SUB-ADVISERS
On June 20, 1995, David M. Calabro became the portfolio manager for the
Total Return Portfolio. Mr. Calabro is a Large Cap Value and Growth Equity
Portfolio Manager and Balanced Portfolio Manager-Equity. He joined MFS in 1992
as a research analyst following the food, beverage, tobacco, and computer
software industries after seven years of combined experience as a research
analyst and a portfolio manager with Fidelity Investments. Mr. Calabro has 12
years of investment management experience and earned a B.A. degree from
Williams College in 1982.
The date of this Supplement is June 23, 1995.
<PAGE> 4
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
EQUI-SELECT SERIES TRUST
SUPPLEMENT TO PROSPECTUSES
The following supersedes certain information appearing in the
Prospectuses dated May 1, 1995, of Equitable Life Insurance Company of Iowa
Separate Account A and Equi-Select Series Trust ("Trust"). Except as otherwise
provided herein, all capitalized terms have the meanings set forth in the
Prospectuses.
CS First Boston Investment Management Corporation ("CS First Boston
IMC") has been the Sub-Adviser with respect to the Money Market and
Mortage-Backed Securities Portfolios ("Portfolios") of the Trust from October 4,
1994, the date of commencement of the investment operations of the Portfolios,
until the date of this Supplement. In April 1995, an agreement was executed
pursuant to which the assets and certain liabilities of CS First Boston IMC
will be sold to BEA Associates ("BEA"). This transaction has resulted in an
"assignment" (as defined in the Investment Company Act of 1940 ("1940 Act")) of
the Sub-Advisory Agreement between Equitable Investment Services, Inc.
("EISI"), the Trust's Investment Adviser, and CS First Boston IMC. As required
by the 1940 Act, this Sub-Advisory Agreement provided for its automatic
termination in the event of an assignment. At a meeting of the Board of
Trustees of the Trust held on May 17, 1995, the Board approved the terms of a
Sub-Advisory Agreement dated May 17, 1995, between EISI and BEA, pursuant to
which BEA will act as the Sub-Adviser to EISI with respect to the two
Portfolios effective immediately.
BEA, located at One Citicorp Center, 153 East 53rd Street, New York, NY
10022, is a general partnership organized under the laws of the State of New
York and, together with its predecessor firms, has been engaged in the
investment advisory business for over 50 years. Credit Suisse Capital
Corporation ("CS Capital") is an 80% partner and Basic Appraisals, Inc., is a
20% partner in BEA. CS Capital is a wholly-owned subsidiary of Credit Suisse
Investment Corporation, which is a wholly-owned subsidiary of Credit Suisse,
the second largest Swiss bank, which in turn is a subsidiary of CS Holding, a
Swiss corporation. No one person or entity possesses a controlling interest in
Basic Appraisals, Inc. BEA is a diversified asset manager, handling global
equity, balanced, fixed income and derivative securities accounts for private
individuals, as well as corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and other charitable institutions. As of
December 31, 1994, BEA managed approximately $21.3 billion in assets. BEA
currently acts as investment adviser for twenty-one registered investment
companies and twenty-two offshore funds.
The Board's approval of BEA as the Sub-Adviser for the two Portfolios
is for an interim period only. On July 1, 1995, as approved by the Board of
Trustees on May 17th, EISI will assume the portfolio management function for
the Portfolios in addition to the other duties which it currently performs in
its role as the Investment Adviser to the Portfolios. EISI serves as the
investment adviser to the Portfolios pursuant to the Investment Advisory
Agreement dated October 1, 1994, between the Trust and EISI. EISI will continue
to waive its advisory fee, as described in the Prospectus, for each of the
Portfolios until October 6, 1995, or until the net assets of a Portfolio equal
or exceed $25 million.
Robert F. Bowman will be the EISI portfolio manager responsible for the
Money Market Portfolio. Mr. Bowman was graduated from Wabash College with a
Bachelor of Arts degree in Economics and from the University of Texas with a
Master of Busines Administration degree in Finance. Mr. Bowman currently holds
the title of Managing Director at EISI.
Annette F. Shaw will be the EISI portfolio manager responsible for the
Mortgage-Backed Securities Portfolio. Ms. Shaw was graduated from Drake
University with a Bachelor of Science degree in Finance. Ms. Shaw also holds
the Chartered Financial Analyst (CFA) designation. Ms. Shaw currently holds the
title of Managing Director at EISI.
The date of this Supplement is May 17, 1995.
<PAGE> 5
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
<TABLE>
<S> <C>
Home Office & Annuity Service
Center: Mailing Address:
604 Locust Street P.O. Box 9271
Des Moines, Iowa 50309 Des Moines, Iowa 50306-9271
(800) 344-6864
</TABLE>
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND
FIXED ANNUITY CONTRACTS
ISSUED BY
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
The Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contracts (the "Contracts") described in this Prospectus provide for
accumulation of Contract Values on a fixed and variable basis and payment of
monthly annuity payments on a fixed basis. The Contracts are designed for use by
individuals in retirement plans on a Qualified or Non-Qualified basis. (See
"Definitions" on Page 1.)
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance Company
of Iowa (the "Company") which account has been designated Equitable Life
Insurance Company of Iowa Separate Account A (the "Separate Account") or to the
Company's Fixed Account. Under certain circumstances, however, Purchase Payments
may initially be allocated to the Money Market Subaccount of the Separate
Account. (See "Highlights" on Page 2.) The Separate Account invests in shares of
Equi-Select Series Trust (see "Equi-Select Series Trust" on Page 8). The
Separate Account may invest in other Investment Options. Equi-Select Series
Trust is a series fund with ten Portfolios currently available: Advantage
Portfolio, Government Securities Portfolio, International Fixed Income
Portfolio, International Stock Portfolio, Money Market Portfolio,
Mortgage-Backed Securities Portfolio, OTC Portfolio, Research Portfolio,
Short-Term Bond Portfolio and Total Return Portfolio.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents of the Statement of Additional Information can be found on
Page 29 of this Prospectus. For the Statement of Additional Information, call
(800) 344-6864 or write to the Company at the address listed above.
THE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENT IN THE CONTRACTS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
OWNER'S INVESTMENT TO FLUCTUATE, AND WHEN THE CONTRACTS ARE SURRENDERED THE
VALUE MAY BE HIGHER OR LOWER THAN THE PURCHASE PAYMENT.
INQUIRIES:
Any inquiries can be made by telephone or in writing to Equitable Life
Insurance Company of Iowa at (800) 344-6864 or P.O. Box 9271, Des Moines, Iowa
50306-9271.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus and the Statement of Additional Information are dated May
1, 1995.
This Prospectus should be kept for future reference.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................................... 1
HIGHLIGHTS............................................................................ 2
FEE TABLE............................................................................. 4
THE COMPANY........................................................................... 8
THE SEPARATE ACCOUNT.................................................................. 8
Equi-Select Series Trust............................................................ 8
Voting Rights....................................................................... 10
Substitution of Securities.......................................................... 11
CHARGES AND DEDUCTIONS................................................................ 11
Deduction for Withdrawal Charge (Sales Load)........................................ 11
Reduction or Elimination of the Withdrawal Charge................................... 12
Deduction for Mortality and Expense Risk Charge..................................... 12
Deduction for Administrative Charge................................................. 12
Deduction for Annual Contract Maintenance Charge.................................... 13
Deduction for Premium Taxes......................................................... 13
Deduction for Income Taxes.......................................................... 13
Deduction for Trust Expenses........................................................ 13
Deduction for Transfer Fee.......................................................... 14
THE CONTRACTS......................................................................... 14
Ownership........................................................................... 14
Annuitant........................................................................... 14
Assignment.......................................................................... 14
Beneficiary......................................................................... 14
PURCHASE PAYMENTS AND CONTRACT VALUE.................................................. 15
Purchase Payments................................................................... 15
Allocation of Purchase Payments..................................................... 15
Dollar Cost Averaging............................................................... 16
Contract Value...................................................................... 16
Accumulation Unit................................................................... 16
TRANSFERS............................................................................. 17
WITHDRAWALS........................................................................... 17
Automatic Withdrawals............................................................... 18
Texas Optional Retirement Program................................................... 18
Suspension of Payments or Transfers................................................. 19
CONTRACT PROCEEDS..................................................................... 19
Maturity Proceeds................................................................... 19
Death Proceeds...................................................................... 19
Death of the Annuitant.............................................................. 20
Death of Owner...................................................................... 20
Fixed Payment Plans................................................................. 21
Plan A. Interest................................................................. 21
Plan B. Fixed Period............................................................. 21
Plan C. Life Income.............................................................. 21
DISTRIBUTOR........................................................................... 22
PERFORMANCE INFORMATION............................................................... 22
Money Market Portfolio.............................................................. 22
Other Portfolios.................................................................... 22
</TABLE>
i
<PAGE> 7
TABLE OF CONTENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TAX STATUS............................................................................ 23
General............................................................................. 23
Diversification..................................................................... 24
Multiple Contracts.................................................................. 25
Tax Treatment of Assignments........................................................ 25
Income Tax Withholding.............................................................. 25
Tax Treatment of Withdrawals -- Non-Qualified Contracts............................. 25
Qualified Plans..................................................................... 26
Tax Treatment of Withdrawals -- Qualified Contracts................................. 27
Tax-Sheltered Annuities -- Withdrawal Limitations................................... 28
Contracts Owned by Other than Natural Persons....................................... 28
FINANCIAL STATEMENTS.................................................................. 28
LEGAL PROCEEDINGS..................................................................... 28
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.......................... 29
</TABLE>
ii
<PAGE> 8
DEFINITIONS
ACCUMULATION PERIOD -- The period during which Purchase Payments may be
made prior to the Maturity Date.
ACCUMULATION UNIT -- A unit of measure used to calculate the Contract Value
in a Subaccount of the Separate Account prior to the Maturity Date.
AGE -- The Annuitant's age on his or her last birthday.
ANNUITANT -- The natural person on whose life Annuity Payments are based.
ANNUITY PAYMENTS -- The series of payments after the Maturity Date under
the Payment Plan selected.
BENEFICIARY -- The person the Owner has chosen to receive the Proceeds on
the Annuitant's death as shown on the Company's records. There may be different
classes of Beneficiaries, such as primary and contingent. These classes set the
order of payment. There may be more than one Beneficiary in a class.
COMPANY -- Equitable Life Insurance Company of Iowa.
CONTRACT ANNIVERSARY -- An anniversary of the Issue Date of the Contract.
CONTRACT YEAR -- One year from the Issue Date and from each Contract
Anniversary.
FIXED ACCOUNT -- The Company's general investment account which contains
all the assets of the Company with the exception of the Separate Account and
other segregated asset accounts.
INVESTMENT OPTION -- An investment entity the Company may make available
from time to time.
ISSUE DATE/DATE OF ISSUE -- The effective date of the Contract.
MATURITY DATE -- The date on which Annuity Payments begin.
NON-QUALIFIED CONTRACTS -- Contracts issued under non-qualified plans which
do not receive favorable tax treatment under Sections 401, 403(b) or 408 of the
Internal Revenue Code of 1986, as amended (the "Code").
OWNER -- The person(s) who owns the Contract. The Owner may be someone
other than the Annuitant. There may be Joint Owners.
PORTFOLIO -- A segment of an Investment Option which constitutes a separate
and distinct class of shares.
PROCEEDS -- Proceeds are the amounts payable under the Contract.
PURCHASE PAYMENT -- An amount paid to the Company to provide benefits under
the Contract. A Purchase Payment does not include transfers between the Separate
Account and the Fixed Account or among Subaccounts.
PURCHASE PAYMENT ANNIVERSARY -- The anniversary of a Purchase Payment.
QUALIFIED CONTRACTS -- Contracts issued under qualified plans which receive
favorable tax treatment under Sections 401, 403(b) or 408 of the Code.
SEPARATE ACCOUNT -- A separate investment account of the Company designated
as Equitable Life Insurance Company of Iowa Separate Account A, into which
Purchase Payments or Contract Values may be allocated.
SUBACCOUNT -- A segment of the Separate Account representing an investment
in an Investment Option.
VALUATION DATE -- The Separate Account will be valued each day that the New
York Stock Exchange and the Company's Annuity Service Center both are open for
business.
VALUATION PERIOD -- The period beginning at the close of business of the
New York Stock Exchange on each Valuation Date and ending at the close of
business for the next succeeding Valuation Date.
1
<PAGE> 9
HIGHLIGHTS
At the Owner's direction, Purchase Payments for the Contracts will be
allocated to a segregated investment account of Equitable Life Insurance Company
of Iowa (the "Company") which account has been designated Equitable Life
Insurance Company of Iowa Separate Account A (the "Separate Account") or to the
Company's Fixed Account. Under certain circumstances, however, Purchase Payments
may initially be allocated to the Money Market Subaccount of the Separate
Account (see below). The Separate Account invests in shares of Equi-Select
Series Trust (see "Equi-Select Series Trust" on Page 8). The Separate Account
may invest in other Investment Options. Owners bear the investment risk for all
amounts allocated to the Separate Account.
Within twenty (20) days of the date of receipt of the Contract by the Owner
(or within ten (10) days of the date of receipt with respect to the
circumstances described in (a) and (b) below or in states where required), it
may be returned by delivering or mailing it to the Company at its Annuity
Service Center. When the Contract is received at the Annuity Service Center, the
Company will refund the Contract Value computed at the end of the Valuation
Period during which the Contract is received by the Company except in the
following circumstances: (a) where the Contract is purchased pursuant to an
Individual Retirement Annuity; (b) in those states which require the Company to
refund Purchase Payments, less withdrawals; or (c) in the case of Contracts
(including Contracts purchased pursuant to an Individual Retirement Annuity)
which are deemed by certain states to be replacing an existing annuity or
insurance contract and which require the Company to refund Purchase Payments,
less withdrawals. With respect to the circumstances described in (a), (b) and
(c) above, the Company will refund the greater of Purchase Payments, less any
withdrawals, or the Contract Value, and will allocate initial purchase payments
to the Money Market Subaccount until the expiration of fifteen days from the
Issue Date (or twenty-five days in the case of Contracts described under (c)
above). Upon the expiration of the fifteen day period (or twenty-five day period
with respect to Contracts described under (c)), the Subaccount value of the
Money Market Subaccount will be allocated to the Separate Account or Fixed
Account in accordance with the election made by the Owner in the Application. In
Pennsylvania, when the Contract is purchased pursuant to an Individual
Retirement Annuity and is not deemed to be replacing an existing annuity or
insurance contract, the Owner may return the Contract within twenty (20) days of
receipt. Further, in Pennsylvania when the Contract is received at the Annuity
Service Center during the first seven days, the Company will refund the greater
of Purchase Payments, less withdrawals or the Contract Value, thereafter (days
8-20), the Company will refund the Contract Value computed at the end of the
Valuation Period during which the Contract is received by the Company. In
Oregon, when the Contract is purchased pursuant to an Individual Retirement
Annuity, the Owner may return the Contract within twenty (20) days of receipt.
Further, when the Contract is received at the Annuity Service Center during the
first ten days, the Company will refund the greater of the initial Purchase
Payment, less any withdrawals or the Contract Value as of the date of
cancellation. Thereafter (days 11-20), the Company will refund the Contract
Value as of the date of cancellation. The initial Purchase Payment will be
allocated to the Money Market Sub-Account as described above.
A Withdrawal Charge (sales load) may be deducted in the event of a
withdrawal of all or a portion of the Contract Value. The Withdrawal Charge
percentages are based upon the number of Purchase Payment Anniversaries that
Purchase Payments have remained in the Contract before being withdrawn:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
---------------------------- ------------------------------------
<S> <C>
1........................................................ 8% of the Purchase Payment withdrawn
2........................................................ 7% of the Purchase Payment withdrawn
3........................................................ 6% of the Purchase Payment withdrawn
4........................................................ 5% of the Purchase Payment withdrawn
5........................................................ 4% of the Purchase Payment withdrawn
6........................................................ 3% of the Purchase Payment withdrawn
7........................................................ 2% of the Purchase Payment withdrawn
8........................................................ 1% of the Purchase Payment withdrawn
9 and after.............................................. 0% of the Purchase Payment withdrawn
</TABLE>
2
<PAGE> 10
At any time, the Owner may make a withdrawal without the imposition of a
Withdrawal Charge of an amount equal to 10% of the total of all Purchase
Payments at the beginning of the Contract Year, less any Purchase Payments
previously withdrawn ("Free Withdrawal"). In certain states, an Owner may not
make a Free Withdrawal until after the first Contract Year. Any withdrawals
without a Withdrawal Charge not used in a Contract Year may not be used in any
subsequent Contract Year. (See "Charges and Deductions -- Deduction for
Withdrawal Charge (Sales Load)" on Page 11.) With respect to the assessment of a
Withdrawal Charge, the distribution of Purchase Payments from within a
Subaccount or the Fixed Account is on a first-in, first-out basis. (See
"Withdrawals" on Page 17.)
There is a Mortality and Expense Risk Charge which is equal, on an annual
basis, to 1.25% of the average daily net asset value of the Separate Account.
This Charge compensates the Company for assuming the mortality and expense risks
under the Contracts. (See "Charges and Deductions -- Deduction for Mortality and
Expense Risk Charge" on Page 12.)
There is an Administrative Charge which is equal, on an annual basis, to
.15% of the average daily net asset value of the Separate Account. This Charge
compensates the Company for costs associated with the administration of the
Contracts and the Separate Account. (See "Charges and Deductions -- Deduction
for Administrative Charge" on Page 12.)
There is an Annual Contract Maintenance Charge of $30 each Contract Year
prior to the Maturity Date. (See "Charges and Deductions -- Deduction for Annual
Contract Maintenance Charge" on Page 13.)
Premium taxes or other taxes payable to a state or other governmental
entity will be charged against the Contract Values. Premium taxes generally
range from 0% to 4%. (See "Charges and Deductions -- Deduction for Premium
Taxes" on Page 13.)
Under certain circumstances, a Transfer Fee may be assessed when an Owner
transfers Contract Values from one Subaccount to another Subaccount or to or
from the Fixed Account. (See "Charges and Deductions -- Deduction for Transfer
Fee" on Page 14.)
There is a ten percent (10%) federal income tax penalty applied to the
income portion of any distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Code); (d) in a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer and
his or her Beneficiary; (e) under an immediate annuity; or (f) which are
allocable to purchase payments made prior to August 14, 1982. The Contract
provides that upon the death of the Annuitant prior to the Maturity Date, the
Death Proceeds will be paid to the named Beneficiary. Such payments made upon
the death of the Annuitant who is not the Owner of the Contract do not qualify
for the death of Owner exception described above, and will be subject to the ten
percent (10%) distribution penalty unless the Beneficiary is 59 1/2 or one of
the other exceptions to the penalty applies. For federal income tax purposes,
withdrawals are deemed to be on a last-in, first-out basis. Separate tax
withdrawal penalties and restrictions apply to Qualified Contracts. (See "Tax
Status -- Tax Treatment of Withdrawals -- Qualified Contracts" on Page 27.) For
a further discussion of the taxation of the Contracts, see "Tax Status" on Page
23.
Withdrawals of amounts attributable to contributions made pursuant to a
salary reduction agreement (as defined in Section 403(b)(11) of the Code) are
limited to circumstances only when the Owner attains age 59 1/2, separates from
service, dies, becomes disabled (within the meaning of Section 72(m)(7) of the
Code) or in the case of hardship. Withdrawals for hardship are restricted to the
portion of the Owner's Contract Value which represents contributions made by the
Owner and does not include any investment result. The limitations on withdrawals
became effective on January 1, 1989, and apply only to: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Tax penalties may also apply. (See "Tax Status
-- Tax Treatment of Withdrawals -- Qualified Contracts" on Page 27.) Owners
should consult their own tax counsel or other tax adviser regarding any
distributions. (See "Tax Status -- Tax Sheltered Annuities -- Withdrawal
Limitations" on Page 28.)
See "Tax Status -- Diversification" on Page 24 for a discussion of owner
control of the underlying investments in a variable annuity contract.
3
<PAGE> 11
Because of certain exemptive and exclusionary provisions, interests in the
Fixed Account are not registered under the Securities Act of 1933 and the Fixed
Account is not registered as an investment company under the Investment Company
Act of 1940, as amended. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these Acts and the Company
has been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in the Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
FEE TABLE
OWNER TRANSACTION EXPENSES
Withdrawal Charge (see Note 2 below)
(as a percentage of Purchase Payments withdrawn)
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY CHARGE
---------------------------- ------
<S> <C>
1........................................................... 8%
2........................................................... 7%
3........................................................... 6%
4........................................................... 5%
5........................................................... 4%
6........................................................... 3%
7........................................................... 2%
8........................................................... 1%
9+.......................................................... 0
<CAPTION>
<S> <C>
Transfer Fee (see Note 3 below).............. No charge for first 12 transfers in a
Contract Year; thereafter the fee is the
lesser of 2% of the Contract Value
transferred or an amount not greater than
$25.
Annual Contract Maintenance Charge........... $30 per Contract per year
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge................................ 1.25%
Administrative Charge............................................ .15%
-----
Total Separate Account Annual Expenses........................... 1.40%
</TABLE>
4
<PAGE> 12
EQUI-SELECT SERIES TRUST'S ANNUAL EXPENSES
(as a percentage of the average daily net assets of a Portfolio)
<TABLE>
<CAPTION>
MANAGEMENT OTHER TOTAL ANNUAL
FEES* EXPENSES** EXPENSES
---------- ---------- ------------
<S> <C> <C> <C>
Advantage Portfolio....................................... .50 % .30% .80 %
Government Securities Portfolio........................... .75 % .50% 1.25 %
International Fixed Income Portfolio...................... .85 % .75% 1.60 %
International Stock Portfolio............................. .80 % .75% 1.55 %
Money Market Portfolio.................................... .375% .30% .675%
Mortgage-Backed Securities Portfolio...................... .75 % .50% 1.25 %
OTC Portfolio............................................. .80 % .75% 1.55 %
Research Portfolio........................................ .80 % .75% 1.55 %
Short-Term Bond Portfolio................................. .65 % .30% .95 %
Total Return Portfolio.................................... .80 % .75% 1.55 %
</TABLE>
-------------------------
* EQUITABLE INVESTMENT SERVICES, INC. ("EISI"), THE TRUST'S INVESTMENT ADVISER,
HAS AGREED TO WAIVE ITS MANAGEMENT FEES FOR EACH OF THE PORTFOLIOS FOR THE
INITIAL TWELVE (12) MONTHS OF EACH PORTFOLIO'S INVESTMENT OPERATIONS (UNTIL
OCTOBER 6, 1995) OR UNTIL THE NET ASSETS OF A PORTFOLIO EQUAL OR EXCEED $25
MILLION, WHICHEVER IS EARLIER. THE MANAGEMENT FEES SHOWN ABOVE DO NOT REFLECT
SUCH WAIVERS. UNTIL OCTOBER 6, 1995, AN OWNER WILL NOT PAY THE MANAGEMENT
FEES SHOWN ABOVE (UNLESS A PORTFOLIO'S NET ASSETS EQUAL OR EXCEED $25
MILLION). THE EXAMPLES BELOW ARE CALCULATED BASED UPON THE DEDUCTION OF THE
FULL MANAGEMENT FEES.
** UNTIL OCTOBER 6, 1995 EISI HAS UNDERTAKEN TO REIMBURSE EACH PORTFOLIO FOR ALL
OPERATING EXPENSES, EXCLUDING MANAGEMENT FEES, THAT EXCEED .75% OF EACH
PORTFOLIO'S AVERAGE DAILY NET ASSETS. BEGINNING OCTOBER 6, 1995, EISI WILL
UNDERTAKE TO REIMBURSE EACH PORTFOLIO FOR ALL OPERATING EXPENSES, EXCLUDING
MANAGEMENT FEES, THAT EXCEED .30% OF THE AVERAGE DAILY NET ASSETS OF THE
ADVANTAGE, SHORT-TERM BOND AND MONEY MARKET PORTFOLIOS, .50% OF THE AVERAGE
DAILY NET ASSETS OF THE MORTGAGE-BACKED SECURITIES AND GOVERNMENT SECURITIES
PORTFOLIOS AND .75% OF THE AVERAGE DAILY NET ASSETS OF THE INTERNATIONAL
STOCK, INTERNATIONAL FIXED INCOME, OTC, TOTAL RETURN AND RESEARCH PORTFOLIOS.
IN ADDITION, STATE STREET BANK AND TRUST COMPANY ("STATE STREET"), THE
TRUST'S CUSTODIAN, TRANSFER AGENT AND SUBADMINISTRATOR, HAS AGREED TO WAIVE
CERTAIN FEES. HAD EISI NOT UNDERTAKEN TO REIMBURSE SUCH EXPENSES AND HAD
STATE STREET NOT AGREED TO WAIVE SUCH FEES, THE "OTHER EXPENSES" LISTED ABOVE
WOULD HAVE BEEN HIGHER. THE EXAMPLES BELOW ARE CALCULATED BASED UPON THE
REIMBURSEMENT OF EXPENSES BY EISI AND WAIVER OF FEES BY STATE STREET.
5
<PAGE> 13
EXAMPLES
An Owner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:
(a) if the Contract is fully surrendered at the end of each time period;
(b) if the Contract is not surrendered;
(c) if Payment Plan A - Option 2 is elected.
<TABLE>
<CAPTION>
TIME PERIODS
-------------------------------
1 YEAR 3 YEARS
-------------- --------------
<S> <C> <C>
Advantage Portfolio............................................. a) $103.39 a) $125.92
b) $ 23.39 b) $ 71.92
c) $103.39 c) $125.92
Government Securities Portfolio................................. a) $107.89 a) $139.42
b) $ 27.89 b) $ 85.42
c) $107.89 c) $139.42
International Fixed Income Portfolio............................ a) $111.39 a) $149.79
b) $ 31.39 b) $ 95.79
c) $111.39 c) $149.79
International Stock Portfolio................................... a) $110.89 a) $148.32
b) $ 30.89 b) $ 94.32
c) $110.89 c) $148.32
Money Market Portfolio.......................................... a) $102.13 a) $122.14
b) $ 22.13 b) $ 68.14
c) $102.13 c) $122.14
Mortgage-Backed Securities Portfolio............................ a) $107.89 a) $139.42
b) $ 27.89 b) $ 85.42
c) $107.89 c) $139.42
OTC Portfolio................................................... a) $110.89 a) $148.32
b) $ 30.89 b) $ 94.32
c) $110.89 c) $148.32
Research Portfolio.............................................. a) $110.89 a) $148.32
b) $ 30.89 b) $ 94.32
c) $110.89 c) $148.32
Short-Term Bond Portfolio....................................... a) $104.89 a) $130.44
b) $ 24.89 b) $ 76.44
c) $104.89 c) $130.44
Total Return Portfolio.......................................... a) $110.89 a) $148.32
b) $ 30.89 b) $ 94.32
c) $110.89 c) $148.32
</TABLE>
NOTES TO FEE TABLE AND EXAMPLES
1. The purpose of the Fee Table is to assist the Owner in understanding the
various costs and expenses that an Owner will incur directly or
indirectly. For additional information, see "Charges and Deductions" in
this Prospectus and the Prospectus for Equi-Select Series Trust.
2. At any time, the Owner may make a withdrawal without the imposition of a
Withdrawal Charge of an amount equal to 10% of the total of all Purchase
Payments at the beginning of the Contract Year, less any Purchase
Payments previously withdrawn. (In certain states, an Owner may not make
a Free Withdrawal until after the first Contract Year.) Any withdrawals
without a Withdrawal Charge not used in a Contract Year may not be used
in a subsequent Contract Year.
6
<PAGE> 14
3. If the Owner is participating in the Dollar Cost Averaging program
providing for the automatic transfer of funds from a Subaccount or the
Fixed Account to any other Subaccount, such transfers are currently not
taken into account in determining the number of transfers for the year
or in determining any Transfer Fee. (See "Charges and Deductions --
Deduction for Transfer Fee" on Page 14 and "Purchase Payments and
Contract Value -- Dollar Cost Averaging" on Page 16.)
4. Premium taxes are not reflected. Premium taxes may apply. (See "Charges
and Deductions -- Deduction for Premium Taxes" on Page 13.)
5. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CONDENSED FINANCIAL INFORMATION
The financial statements of Equitable Life Insurance Company of Iowa and
Equitable Life Insurance Company of Iowa Separate Account A may be found in the
Statement of Additional Information.
The table below gives per unit information about the financial history of
each Portfolio of Equi-Select Series Trust from commencement of operations
(October 7, 1994) to December 31, 1994. This information should be read in
conjunction with the financial statements and related notes of the Separate
Account included in the Statement of Additional Information.
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT OF OPERATIONS
TO DECEMBER 31, 1994
--------------------------
<S> <C>
ADVANTAGE PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.08
No. of units outstanding at end of period.......................... 45,516
GOVERNMENT SECURITIES PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.11
No. of units outstanding at end of period.......................... 1,428
INTERNATIONAL FIXED INCOME PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.06
No. of units outstanding at end of period.......................... 5,098
INTERNATIONAL STOCK PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $ 9.87
No. of units outstanding at end of period.......................... 23,662
MONEY MARKET PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.07
No. of units outstanding at end of period.......................... 34,322
MORTGAGE-BACKED SECURITIES PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $ 9.99
No. of units outstanding at end of period.......................... 2,886
OTC PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.35
No. of units outstanding at end of period.......................... 63,781
</TABLE>
7
<PAGE> 15
<TABLE>
<CAPTION>
PERIOD FROM
COMMENCEMENT OF OPERATIONS
TO DECEMBER 31, 1994
--------------------------
<S> <C>
RESEARCH PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $ 9.72
No. of units outstanding at end of period.......................... 69,177
SHORT-TERM BOND PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $10.15
No. of units outstanding at end of period.......................... 1,141
TOTAL RETURN PORTFOLIO
Unit value at beginning of period.................................. $10.00
Unit value at end of period........................................ $ 9.81
No. of units outstanding at end of period.......................... 33,106
</TABLE>
THE COMPANY
Equitable Life Insurance Company of Iowa (the "Company") was founded in
Iowa in 1867 and is the oldest life insurance company west of the Mississippi.
The Company is currently licensed to do business in the District of Columbia and
all states except Hawaii, Maine, New Hampshire, New York and Vermont. The
Company is a wholly-owned subsidiary of Equitable of Iowa Companies, an Iowa
corporation.
THE SEPARATE ACCOUNT
The Board of Directors of the Company adopted a resolution to establish a
segregated asset account pursuant to Iowa insurance law on January 24, 1994.
This segregated asset account has been designated Equitable Life Insurance
Company of Iowa Separate Account A (the "Separate Account"). The Company has
caused the Separate Account to be registered with the Securities and Exchange
Commission as a unit investment trust pursuant to the provisions of the
Investment Company Act of 1940.
The assets of the Separate Account are the property of the Company.
However, the assets of the Separate Account equal to the reserves and other
contract liabilities with respect to the Separate Account, are not chargeable
with liabilities arising out of any other business the Company may conduct.
Income, gains and losses, whether or not realized, are, in accordance with the
Contracts, credited to or charged against the Separate Account without regard to
other income, gains or losses of the Company. The Company's obligations arising
under the Contracts are general obligations.
The Separate Account meets the definition of a "separate account" under
federal securities laws.
The Separate Account is divided into Subaccounts, with the assets of each
Subaccount invested in one Portfolio of Equi-Select Series Trust. There is no
assurance that the investment objectives of any of the Portfolios will be met.
Owners bear the complete investment risk for Purchase Payments allocated to a
Subaccount. Contract Values will fluctuate in accordance with the investment
performance of the Subaccounts to which Purchase Payments are allocated, and in
accordance with the imposition of the fees and charges assessed under the
Contracts.
EQUI-SELECT SERIES TRUST
Equi-Select Series Trust ("Trust") has been established to act as the
funding vehicle for the Contracts offered. The Trust is managed by Equitable
Investment Services, Inc. ("EISI") which is a wholly-owned subsidiary of the
Equitable of Iowa Companies. EISI has retained Sub-Advisers for each Portfolio
to make investment decisions and place orders. The Sub-Advisers for the
Portfolios are: CS First Boston Investment Management Corporation with respect
to the Money Market and Mortgage-Backed Securities Portfolios; CS First Boston
Investment Management Limited with respect to the International Fixed Income
Portfolio;
8
<PAGE> 16
Strong Capital Management, Inc. with respect to the Advantage, Government
Securities, International Stock and Short-Term Bond Portfolios and Massachusetts
Financial Services Company with respect to the OTC, Research and Total Return
Portfolios. See "Management of the Trust" in the Trust Prospectus, which
accompanies this Prospectus, for additional information concerning EISI and the
Sub-Advisers, including a description of advisory and sub-advisory fees.
PURCHASERS SHOULD READ THIS PROSPECTUS AND THE PROSPECTUS FOR EQUI-SELECT SERIES
TRUST CAREFULLY BEFORE INVESTING.
The Trust is an open-end management investment company. While a brief
summary of the investment objectives of the available Portfolios is set forth
below, more comprehensive information, including a discussion of potential
risks, is found in the current Prospectus for the Trust which is included with
this Prospectus. Additional Prospectuses and the Statement of Additional
Information can be obtained by calling or writing the Company's Home Office.
The Trust is intended to meet differing investment objectives with its
currently available separate Portfolios:
The investment objectives of the Portfolios are as follows:
ADVANTAGE PORTFOLIO. The Advantage Portfolio seeks current income with a
very low degree of share-price fluctuation. The Portfolio invests primarily in
ultra short-term investment grade debt obligations. The Portfolio is designed
for investors who seek higher yields than money market funds generally offer and
who are willing to accept some modest principal fluctuation in order to achieve
that objective. Because its share price will vary, the Portfolio is not an
appropriate investment for those whose primary objective is absolute principal
stability. The Portfolio's investments include a combination of high-quality
money market instruments, as well as securities with longer maturities and
securities of lower quality. Under normal market conditions, it is anticipated
that the portfolio will maintain an average effective maturity of one year or
less.
GOVERNMENT SECURITIES PORTFOLIO. The Government Securities Portfolio seeks
total return by investing for a high level of current income with a moderate
degree of share-price fluctuation. The Portfolio is designed for long-term
investors who want to pursue higher income than shorter-term securities
generally provide, who are willing to accept the fluctuation in principal
associated with longer-term securities, and who seek the low credit risk that
U.S. Government securities generally carry. Under normal market conditions, at
least 80% of the Portfolio's total assets will be invested in U.S. government
securities.
INTERNATIONAL FIXED INCOME PORTFOLIO. The International Fixed Income
Portfolio seeks to provide high total return. The Portfolio will seek to achieve
its objective by investing in both domestic and foreign debt securities and
related foreign currency transactions. The total return will be sought through a
combination of current income, capital gains and gains in currency positions.
Under normal market conditions, the Portfolio will invest primarily in: (i)
obligations issued or guaranteed by foreign national governments, their
agencies, instrumentalities, or political subdivisions; (ii) U.S. government
securities; (iii) debt securities issued or guaranteed by supranational
organizations, considered to be government securities. Under normal conditions,
the Portfolio's Sub-Adviser expects that the Portfolio generally will be
invested in at least six different countries, including the U.S., although the
Portfolio may at times invest all of its assets in a single country. The
Portfolio may invest a significant portion of its assets in foreign securities.
Investing in foreign securities generally involves risks not ordinarily
associated with investing in securities of domestic issuers. Purchasers are
cautioned to read the "Appendix -- Foreign Investments" in the Trust Prospectus
for a discussion of the risks involved in foreign investing.
INTERNATIONAL STOCK PORTFOLIO. The International Stock Portfolio seeks
capital growth. The Portfolio invests primarily in equity securities of issuers
located outside the United States. The Portfolio will invest at least 65% of its
total assets in foreign equity securities, including common stocks, preferred
stocks, and securities that are convertible into common or preferred stocks,
such as warrants and convertible bonds, that are issued by companies whose
principal headquarters are located outside the United States. Under normal
market conditions, the Portfolio expects to invest at least 90% of its assets in
foreign equity securities. The Portfolio will normally invest in securities of
issuers located in at least three different countries. Investing in foreign
securities generally involves risks not ordinarily associated with investing in
securities of domestic
9
<PAGE> 17
issuers. Purchasers are cautioned to read the "Implementation of Policies and
Risks -- International Stock Portfolio" in the Trust Prospectus for a discussion
of the risks involved in foreign investing.
MONEY MARKET PORTFOLIO. The Money Market Portfolio seeks to obtain maximum
current income, consistent with the preservation of capital and the maintenance
of liquidity. The Portfolio will seek to achieve this objective by investing
exclusively in certain U.S. dollar-denominated money market instruments having
remaining maturities of 397 days or less. An investment in the Money Market
Portfolio is neither insured nor guaranteed by the U.S. Government.
MORTGAGE-BACKED SECURITIES PORTFOLIO. The Mortgage-Backed Securities
Portfolio seeks to obtain a high current return, consistent with safety of
principal, primarily through investments in mortgage-backed securities.
Mortgage-backed securities represent interests in, or are secured by and payable
from, pools of mortgage loans, including collateralized mortgage obligations.
OTC PORTFOLIO. The primary investment objective of the OTC Portfolio is to
seek to obtain long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 65% of its assets, under normal circumstances,
in securities principally traded on the over-the-counter (OTC) securities
market.
RESEARCH PORTFOLIO. The Research Portfolio seeks to provide long-term
growth of capital and future income by investing a substantial portion of its
assets in the common stocks or securities convertible into common stocks of
companies believed to possess better than average prospects for long-term
growth. A smaller proportion of the assets may be invested in bonds, short-term
obligations, preferred stocks or common stocks whose principal characteristic is
income production rather than growth. The Portfolio securities of the Research
Portfolio are selected by the investment research analysts in the Equity
Research Group of the Sub-Adviser. The Portfolio's assets are allocated to
economic sectors (e.g. health care, technology, consumer staples) and then to
industry groups within these sectors (e.g. within the health care sector, the
managed care, drug and medical supply industries). The allocation by sector and
industry is determined by the analysts acting together as a group.
SHORT-TERM BOND PORTFOLIO. The Short-Term Bond Portfolio seeks total return
by investing for a high level of current income with a low degree of share-price
fluctuation. The Portfolio is designed for investors who are willing to accept
some fluctuation in principal in order to pursue a higher level of income than
is generally available from money market securities. Because its share price
will vary, the Portfolio is not an appropriate investment for those whose
primary objective is absolute principal stability. The Portfolio invests
primarily in short- and intermediate-term, investment grade debt obligations.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in debt obligations, such as corporate and U.S. government debt
obligations.
TOTAL RETURN PORTFOLIO. The Total Return Portfolio primarily seeks to
obtain above-average income (compared to a portfolio entirely invested in equity
securities) consistent with the prudent employment of capital. While current
income is the primary objective, the Portfolio believes that there should also
be a reasonable opportunity for growth of capital and income, since many
securities offering a better than average yield may also possess growth
potential. Generally, at least 40% of the Portfolio's assets are invested in
equity securities.
VOTING RIGHTS
In accordance with its view of present applicable law, the Company will
vote the shares of the Trust held in the Separate Account at special meetings of
the shareholders in accordance with instructions received from persons having
the voting interest in the Separate Account. The Company will vote shares for
which it has not received instructions, as well as shares attributable to it, in
the same proportion as it votes shares for which it has received instructions.
The Trust does not hold regular meetings of shareholders.
The number of shares which a person has a right to vote will be determined
as of a date to be chosen by the Company not more than sixty (60) days prior to
a shareholder meeting of the Trust. Voting instructions will be solicited by
written communication at least ten (10) days prior to the meeting.
10
<PAGE> 18
SUBSTITUTION OF SECURITIES
If the shares of the Trust (or any Portfolio within the Trust or any other
Investment Option), are no longer available for investment by the Separate
Account or, if in the judgment of the Company, further investment in the shares
should become inappropriate in view of the purpose of the Contracts, the Company
may substitute shares of another Investment Option (or Portfolio) for shares
already purchased or to be purchased in the future by Purchase Payments under
the Contracts. No substitution of securities may take place without prior
approval of the Securities and Exchange Commission and under the requirements it
may impose.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from the Contract Value and the
Separate Account. These charges and deductions are:
DEDUCTION FOR WITHDRAWAL CHARGE (SALES LOAD)
If all or a portion of the Contract Value (see "Withdrawals" on Page 17) is
withdrawn, a Withdrawal Charge (sales load) will be calculated at the time of
each withdrawal and will be deducted from the Contract Value. This Charge
reimburses the Company for expenses incurred in connection with the promotion,
sale and distribution of the Contracts. The Withdrawal Charge percentages are
based upon the number of Purchase Payment Anniversaries that Purchase Payments
have remained in the Contract before being withdrawn as shown in the Table of
Withdrawal Charges below:
TABLE OF WITHDRAWAL CHARGES
<TABLE>
<CAPTION>
PURCHASE PAYMENT ANNIVERSARY WITHDRAWAL CHARGE
---------------------------- ----------------------------------
<S> <C>
1........................................................ 8% of the Purchase Payment withdrawn
2........................................................ 7% of the Purchase Payment withdrawn
3........................................................ 6% of the Purchase Payment withdrawn
4........................................................ 5% of the Purchase Payment withdrawn
5........................................................ 4% of the Purchase Payment withdrawn
6........................................................ 3% of the Purchase Payment withdrawn
7........................................................ 2% of the Purchase Payment withdrawn
8........................................................ 1% of the Purchase Payment withdrawn
9 and after.............................................. 0% of the Purchase Payment withdrawn
</TABLE>
At any time the Owner may make a withdrawal without the imposition of a
Withdrawal Charge of an amount equal to 10% of the total of all Purchase
Payments at the beginning of the Contract Year less any Purchase Payments
previously withdrawn. In certain states, an Owner may not make a Free Withdrawal
until after the first Contract Year. Any withdrawals without a Withdrawal Charge
not used in a Contract Year may not be used in any subsequent Contract Year.
With respect to the assessment of a Withdrawal Charge, the distribution of
Purchase Payments from within a Subaccount or the Fixed Account are on a
first-in, first-out basis. (See "Withdrawals" on Page 17.)
Commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions, up to an amount currently equal to
7.75% of Purchase Payments, for promotional or distribution expenses associated
with the marketing of the Contracts. The Company may, by agreement with the
broker-dealer, pay commissions as a combination of a certain percentage amount
at the time of sale and a trail commission (which when combined could exceed
7.75% of Purchase Payments). In addition, under certain circumstances, the
Company may pay certain sellers production bonuses which will take into account,
among other things, the total Purchase Payments which have been made under
Contracts associated with the broker-dealer. Additional payments or allowances
may be made for other services not directly related to the sale of the
Contracts. To the extent that the Withdrawal Charge is insufficient to cover the
actual costs of distribution, the Company may use any of its corporate assets,
including potential profit which may arise from the Mortality and Expense Risk
Charge (see below), to provide for any difference.
11
<PAGE> 19
No Withdrawal Charge is deducted if Plan A -- Option 1; Plan B or Plan C is
elected. (See "Contract Proceeds -- Fixed Payment Plans" on Page 21.)
In addition, in certain states, an endorsement to the Contract is issued
which permits the Owner to make a total or partial withdrawal without the
imposition of a Withdrawal Charge if the Annuitant is hospitalized and/or
confined to an eligible nursing home for 30 consecutive days.
REDUCTION OR ELIMINATION OF THE WITHDRAWAL CHARGE
The amount of the Withdrawal Charge on the Contracts may be reduced or
eliminated when sales of the Contracts are made to individuals or to a group of
individuals in a manner that results in savings of sales expenses. The
entitlement to reduction of the Withdrawal Charge will be determined by the
Company after examination of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less
than for a smaller group because of the ability to implement large
numbers of Contracts with fewer sales contacts.
2. The total amount of Purchase Payments to be received will be considered.
Per Contract sales expenses are likely to be less on larger Purchase
Payments than on smaller ones.
3. Any prior or existing relationship with the Company will be considered.
Per Contract sales expenses are likely to be less when there is a prior
existing relationship because of the likelihood of implementing the
Contract with fewer sales contacts.
4. There may be other circumstances, of which the Company is not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, the Company determines
that there will be a reduction in sales expenses, the Company may provide for a
reduction or elimination of the Withdrawal Charge.
The Withdrawal Charge may be eliminated when the Contracts are issued to an
officer, director or employee of the Company or any of its affiliates. In no
event will reductions or elimination of the Withdrawal Charge be permitted where
reductions or elimination will be unfairly discriminatory to any person.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
The Company deducts on each Valuation Date a Mortality and Expense Risk
Charge which is equal, on an annual basis, to 1.25% (consisting of approximately
.90% for mortality risks and approximately .35% for expense risks) of the
average daily net asset value of the Separate Account. The mortality risks
assumed by the Company arise from its contractual obligation to make annuity
payments after the Annuity Date for the life of the Annuitant and to waive the
Withdrawal Charge in the event of the death of the Annuitant. Also, there is a
mortality risk borne by the Company with respect to the guaranteed death benefit
(see "Contract Proceeds -- Death Proceeds" on Page 19). The expense risk assumed
by the Company is that all actual expenses involved in administering the
Contracts, including Contract maintenance costs, administrative costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees and the
costs of other services may exceed the amount recovered from the Annual Contract
Maintenance Charge and the Administrative Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the
actual costs, the loss will be borne by the Company. Conversely, if the amount
deducted proves more than sufficient, the excess will be a profit to the
Company. The Company expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by the Company and
cannot be increased.
DEDUCTION FOR ADMINISTRATIVE CHARGE
The Company deducts on each Valuation Date an Administrative Charge which
is equal, on an annual basis, to .15% of the average daily net asset value of
the Separate Account. This charge, together with the Annual Contract Maintenance
Charge (see below), is to reimburse the Company for the expenses it incurs in
12
<PAGE> 20
the establishment and maintenance of the Contracts and the Separate Account.
These expenses include but are not limited to: preparation of the Contracts,
confirmations, annual reports and statements, maintenance of Owner records,
maintenance of Separate Account records, administrative personnel costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, the
costs of other services necessary for Owner servicing and all accounting,
valuation, regulatory and reporting requirements. Since this charge is an asset-
based charge, the amount of the charge attributable to a particular Contract may
have no relationship to the administrative costs actually incurred by that
Contract. The Company does not intend to profit from this charge. This charge
will be reduced to the extent that the amount of this charge is in excess of
that necessary to reimburse the Company for its administrative expenses. Should
this charge prove to be insufficient, the Company will not increase this charge
and will incur the loss.
DEDUCTION FOR ANNUAL CONTRACT MAINTENANCE CHARGE
The Company deducts an Annual Contract Maintenance Charge of $30 from the
Contract Value on each Contract Anniversary prior to the Maturity Date. This
charge is to reimburse the Company for its administrative expenses (see above).
This charge is deducted by subtracting values from the Fixed Account and/or
cancelling Accumulation Units from each applicable Subaccount in the ratio that
the value of each account bears to the total Contract Value. If a total
withdrawal is made on other than a Contract Anniversary, the Annual Contract
Maintenance Charge will be deducted at the time of withdrawal. If the Maturity
Date is not a Contract Anniversary, the Annual Contract Maintenance Charge will
be deducted from the Maturity Proceeds. The Company has set this charge at a
level so that, when considered in conjunction with the Administrative Charge
(see above), it will not make a profit from the charges assessed for
administration.
DEDUCTION FOR PREMIUM TAXES
The Contract provides that any premium or other taxes paid to any
government entity relating to the Contract will be deducted from the Purchase
Payment or Contract Value when incurred. Some states assess premium taxes at the
time Purchase Payments are made; others assess premium taxes at the time Annuity
Payments begin. Premium taxes generally range from 0% to 4%. The Contract also
provides that the Company may, at its sole discretion, pay taxes when due and
deduct that amount from the Contract Value at a later date. Payment at an
earlier date does not waive any right the Company may have to deduct amounts at
a later date. The Company currently intends to advance any premium taxes due at
the time Purchase Payments are made and then deduct such premium taxes from an
Owner's Contract Value at the time Annuity Payments begin or upon withdrawal if
the Company is unable to obtain a refund. The Company will, in its sole
discretion, determine when taxes have resulted from:
(1) the investment experience of the Separate Account;
(2) receipt by the Company of the Purchase Payments; or
(3) commencement of Annuity Payments.
DEDUCTION FOR INCOME TAXES
While the Company is not currently maintaining a provision for federal
income taxes with respect to the Separate Account, the Company has reserved the
right to establish a provision for income taxes if it determines, in its sole
discretion, that it will incur a tax as a result of the operation of the
Separate Account. The Company will deduct for any income taxes incurred by it as
a result of the operation of the Separate Account whether or not there was a
provision for taxes and whether or not it was sufficient. The Company will
deduct any withholding taxes required by applicable law.
DEDUCTION FOR TRUST EXPENSES
There are other deductions from and expenses paid out of the assets of the
Trust, including amounts paid for other expenses and amounts paid to the
Investment Adviser as Management Fees, which are described in the accompanying
Trust Prospectus.
13
<PAGE> 21
DEDUCTION FOR TRANSFER FEE
Prior to the Maturity Date, the Owner may transfer all or part of the
Owner's interest in a Subaccount or the Fixed Account (subject to Fixed Account
provisions) without the imposition of any fee or charge if there have been no
more than 12 transfers made in the Contract Year. If more than 12 transfers have
been made in the Contract Year, the Company will deduct a Transfer Fee which is
equal to the lesser of 2% of the Contract Value transferred or an amount not
greater than $25. (The current amount is $25.) Currently, all transfers made on
any one day are considered a single transfer. If the Owner is participating in
the Dollar Cost Averaging program providing for the automatic transfer of funds
from a Subaccount or the Fixed Account to any other Subaccount(s), such
transfers currently are not counted toward the number of transfers for the year
and are not taken into account in determining any Transfer Fee. However, the
Company reserves the right to treat multiple transfers in a single day and
Dollar Cost Averaging transfers as standard transfers when determining annual
transfers and imposing the Transfer Fee. (See "Purchase Payments and Contract
Value -- Dollar Cost Averaging" on Page 16.)
THE CONTRACTS
OWNERSHIP
The Owner exercises all the rights under the Contract. The maximum issue
Age is 85 years old for Owners and Annuitants. The Owner may name a new Owner.
Any change in Ownership must be sent to the Company's Annuity Service Center on
a form acceptable to the Company. The change will go into effect when it is
signed, subject to any payments or actions taken by the Company before it
records it. The Company is not responsible for any tax consequences occurring as
a result of ownership changes.
ANNUITANT
The Annuitant is the natural person on whose life Annuity Payments are
based. The Annuitant is irrevocably named at the time the Contract is issued.
ASSIGNMENT
During the Annuitant's life, the Owner can assign some or all of the
Owner's rights under the Contract to someone else.
A signed copy of the assignment must be sent to the Company's Annuity
Service Center on a form acceptable to the Company. An assignment of the
Contract is not binding on the Company until the assignment, or a copy, is
recorded at the Annuity Service Center, subject to any payments or actions taken
by the Company before the recording. The Company is not responsible for the
validity or effect of any assignment, including any tax consequences.
The consent of any Irrevocable Beneficiaries is required before assignment
of Proceeds can happen.
BENEFICIARY
The Owner can name any Beneficiary to be an Irrevocable Beneficiary. The
interest of an Irrevocable Beneficiary cannot be changed without his or her
consent. Otherwise, the Owner can change Beneficiaries as explained below.
Unless the Owner states otherwise, all rights of a Beneficiary, including
an Irrevocable Beneficiary, will end if he or she dies before the Annuitant. If
any Beneficiary dies before the Annuitant, that Beneficiary's interest will pass
to any other Beneficiaries according to their respective interests. If all
Beneficiaries die before the Annuitant, upon the Annuitant's death the Company
will pay the Death Proceeds to the Owner, if living, otherwise to the Owner's
estate or legal successors.
The Owner can change the Beneficiary at any time during the Annuitant's
life. To do so, the Owner must send a written request to the Company's Annuity
Service Center. The request must be on a form acceptable to
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the Company. The change will go into effect when signed, subject to any payments
or actions taken by the Company before it records the change.
A change cancels all prior Beneficiary designations; except, however, a
change will not cancel any Irrevocable Beneficiary without his or her consent.
The interest of the Beneficiary will be subject to:
(1) any assignment of the Contract, accepted and recorded by the Company
prior to the Annuitant's death; and
(2) any Payment Plan in effect on the date of the Annuitant's death.
Death Proceeds will be paid as though the Beneficiary died before the
Annuitant if:
(1) the Beneficiary dies at the same time as the Annuitant; or
(2) the Beneficiary dies within 24 hours of the Annuitant's death.
PURCHASE PAYMENTS AND CONTRACT VALUE
PURCHASE PAYMENTS
The initial Purchase Payment is due on the Issue Date. There is no Contract
until the initial Purchase Payment is paid. If any check presented as payment of
any part of the initial Purchase Payment for a Contract is not honored, the
Contract is void.
The minimum Purchase Payment for Non-Qualified Contracts is an aggregate of
$5,000 the first year and the minimum subsequent Purchase Payment is $100. Under
certain circumstances the Company may waive and/or modify the minimum subsequent
Purchase Payment requirement for Non-Qualified Contracts in the case of large
groups who submit Purchase Payments through Company approved billing procedures.
For Qualified Contracts, the minimum Purchase Payment is $100 per month if
payroll deduction is used; otherwise it is an aggregate of $2,000 per year.
Prior Company approval must be obtained for subsequent Purchase Payments in
excess of $500,000 or for total Purchase Payments in excess of $1 million. The
Company reserves the right to decline any Application or Purchase Payment.
ALLOCATION OF PURCHASE PAYMENTS
The initial Purchase Payment is allocated to the Fixed Account or the
Subaccount(s) of the Separate Account as elected by the Owner. Unless otherwise
changed by the Owner, subsequent Purchase Payments are allocated in the same
manner as the initial Purchase Payment. (In Oregon, Washington and New Jersey,
after the second Contract Year, subsequent Purchase Payments may not be
allocated to the Fixed Account.) Under certain circumstances, Purchase Payments,
which have been designated by prospective purchasers to be allocated to the
Fixed Account or Subaccounts other than the Money Market Subaccount, may
initially be allocated to the Money Market Subaccount during the free look
period. (See "Highlights" on Page 2.) For each Subaccount, Purchase Payments are
converted into Accumulation Units. The number of Accumulation Units credited to
the Contract is determined by dividing the Purchase Payment allocated to the
Subaccount by the value of the Accumulation Unit for the Subaccount. Purchase
Payments allocated to the Fixed Account are credited in dollars.
If the Application for a Contract is in good order, the Company will apply
the Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the Application for a Contract
is not in good order, the Company will attempt to get it in good order or the
Company will return the Application and the Purchase Payment within five (5)
business days. The Company will not retain a Purchase Payment for more than five
(5) business days while processing an incomplete Application unless it has been
so authorized by the purchaser.
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DOLLAR COST AVERAGING
Dollar Cost Averaging is a program which, if elected, permits an Owner to
systematically transfer each month amounts from any one Subaccount or the Fixed
Account (subject to Fixed Account provisions) to any Subaccount(s). By
allocating amounts on a regularly scheduled basis as opposed to allocating the
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. The minimum amount which may be transferred is
$100. The minimum duration of participation in any Dollar Cost Averaging program
is currently five (5) months. An Owner must have a minimum of the amount
required in the Subaccount or the Fixed Account to complete the Owner's
designated program, in order to participate in the Dollar Cost Averaging
program.
All Dollar Cost Averaging transfers will be made on the 15th of each month
or another monthly date mutually agreed upon (or the next Valuation Date if the
15th of the month is not a Valuation Date). If the Owner is participating in the
Dollar Cost Averaging program, such transfers currently are not taken into
account in determining any Transfer Fee. The Company reserves the right to treat
Dollar Cost Averaging transfers as standard transfers when determining the
number of transfers in a year and imposing any applicable Transfer Fees. An
Owner participating in the Dollar Cost Averaging program may not make automatic
withdrawals of his or her Contract Value. (See "Withdrawals -- Automatic
Withdrawals" on Page 18.)
CONTRACT VALUE
The Contract Value, at any time, is the sum of:
(1) the Fixed Account Value; and
(2) the Separate Account Value.
The Separate Account value on any Valuation Date means the sum of the
Owner's interests in the Subaccounts of the Separate Account. The value of the
Owner's interest in a Subaccount is determined by multiplying the number of
Accumulation Units attributable to that Subaccount by the Accumulation Unit
value for the Subaccount. Any withdrawals or transfers will result in the
cancellation of Accumulation Units in a Subaccount. The Separate Account values
will vary with the performance of the Subaccounts of the Separate Account, any
Purchase Payments paid, partial withdrawals and charges assessed.
ACCUMULATION UNIT
A Purchase Payment when allocated to the Separate Account is converted into
Accumulation Units for the selected Subaccount. The number of Accumulation Units
in a Subaccount credited to the Contract is determined by dividing the Purchase
Payment allocated to that Subaccount by the Accumulation Unit value for that
Subaccount as of the Valuation Period during which the Purchase Payment is
allocated to the Subaccount. The Accumulation Unit value for each Subaccount was
arbitrarily set initially at $10. Subsequent Accumulation Unit values are
determined by subtracting (2) from (1) and dividing the result by (3) where:
(1) is the net result of:
(a) the assets of the Subaccount attributable to Accumulation Units;
plus or minus
(b) the cumulative charge or credit for taxes reserved, which resulted
from the operation or maintenance of the Subaccount.
(2) is the cumulative unpaid charge for the Mortality and Expense Risk
Charge and for the Administrative Charge; and
(3) is the number of Accumulation Units outstanding at the end of the
Valuation Period.
The Accumulation Unit value may increase or decrease from Valuation Period
to Valuation Period.
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TRANSFERS
Prior to the Maturity Date, the Owner may transfer all or part of the
Owner's interest in a Subaccount or the Fixed Account without the imposition of
any fee or charge if there have been no more than 12 transfers for the Contract
Year. All transfers are subject to the following:
(1) if more than 12 free transfers have been made in any Contract Year, the
Company will deduct a Transfer Fee for each subsequent transfer. (The
Transfer Fee is the lesser of 2% of Contract Value transferred or $25.)
The Transfer Fee will be deducted from the amount which is transferred.
Transfers from a Dollar Cost Averaging program are currently not
counted toward the number of annual transfers and are not taken into
account in determining any applicable Transfer Fees. Currently, all
transfers in a single day are treated as a single transfer. The Company
reserves the right to treat Dollar Cost Averaging transfers and
multiple transfers in a single day as standard transfers in determining
the number of annual transfers and the imposition of any applicable
Transfer Fees.
(2) the minimum amount which can be transferred is $100 or the Owner's
entire interest in the Subaccount or the Fixed Account, if less. The
minimum amount which must remain in a Subaccount or Fixed Account after
a transfer is $100 or the Subaccount must be liquidated.
(3) for any Contract Year, transfers of Purchase Payments and any
attributable earnings from the Fixed Account to a Subaccount are
limited to ten percent (10%) of the Purchase Payment and ten percent
(10%) of its attributable earnings. If a Purchase Payment was received
at least eight (8) years prior to the request for transfer, all of the
Purchase Payment and the earnings attributable to it may be transferred
to a Subaccount. (In New Jersey, no amounts may be transferred to the
Fixed Account after the second Contract Year.)
(4) any transfer direction must clearly specify:
(a) the amount which is to be transferred; and
(b) the Fixed Account or Subaccounts which are to be affected.
(5) transfers will be made as of the Valuation Period next following the
Valuation Period during which a written request for a transfer is
received by the Company.
(6) the Company reserves the right, at any time, and without prior notice
to any party, to terminate, suspend, or modify the transfer privilege
described above, subject to applicable state law and regulation.
An Owner may elect to make transfers by telephone. To elect this option the
Owner must do so in writing to the Company. If there are Joint Owners, unless
the Company is informed to the contrary, instructions will be accepted from
either one of the Joint Owners. The Company will use reasonable procedures to
confirm that instructions communicated by telephone are genuine. If it does not,
the Company may be liable for any losses due to unauthorized or fraudulent
instructions. The Company may tape record all telephone instructions.
WITHDRAWALS
Prior to the Maturity Date, the Owner may, upon written request received by
the Company, make a total or partial withdrawal of the Contract Withdrawal
Value. (For Contracts issued in Idaho, no partial withdrawal may be made for 30
days after the Issue Date.) The Contract terminates if a total withdrawal is
made. The Contract Withdrawal Value is:
(1) the Contract Value for the Valuation Period next following the
Valuation Period during which a written request for a withdrawal is
received by the Company; less
(2) any applicable taxes not previously deducted; less
(3) the Withdrawal Charge, if any (see "Charges and Deductions -- Deduction
for Withdrawal Charge (Sales Load)" on Page 11); less
(4) the Annual Contract Maintenance Charge, if any.
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A withdrawal will result in the cancellation of Accumulation Units for each
applicable Subaccount of the Separate Account or a reduction in the Fixed
Account Value. Unless otherwise instructed, a partial withdrawal will be applied
pro rata among each Subaccount and the Fixed Account based on the ratio of the
value of each Subaccount or Fixed Account to the Contract Value. The Company
will pay the amount of any withdrawal within seven (7) calendar days of receipt
of a request, unless the "Suspension of Payments or Transfers" provision is in
effect (see "Suspension of Payments or Transfers" below).
For purposes of determining any applicable Withdrawal Charges or any other
charges under the Contract, the distribution of Purchase Payments from within a
Subaccount or the Fixed Account is on a first-in, first-out basis with earnings
attributable to such Purchase Payments considered only after the Purchase
Payment is considered.
Each partial withdrawal must be for an amount which is not less than $100
or the Owner's entire interest in the Subaccount or the Fixed Account, if less.
The minimum Contract Value which must remain in a Subaccount or the Fixed
Account after a partial withdrawal is $100.
Certain tax withdrawal penalties and restrictions may apply to withdrawals
from the Contracts. (See "Tax Status" on Page 23.) For Contracts purchased in
connection with 403(b) plans, the Code limits the withdrawal of amounts
attributable to contributions made pursuant to a salary reduction agreement (as
defined in Section 403(b)(11) of the Code) to circumstances only when the Owner:
(1) attains age 59 1/2; (2) separates from service; (3) dies; (4) becomes
disabled (within the meaning of Section 72(m)(7) of the Code); or (5) in the
case of hardship.
However, withdrawals for hardship are restricted to the portion of the
Owner's Contract Value which represents contributions made by the Owner and does
not include any investment results. The limitations on withdrawals became
effective on January 1, 1989 and apply only to salary reduction contributions
made after December 31, 1988, to income attributable to such contributions and
to income attributable to amounts held as of December 31, 1988. The limitations
on withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
AUTOMATIC WITHDRAWALS
At any time an Owner may make a withdrawal each Contract Year of up to ten
percent (10%) of the total of all aggregate Purchase Payments at the beginning
of the Contract Year, less any Purchase Payments previously withdrawn, free from
Withdrawal Charges. (In certain states, a Free Withdrawal may not be made until
after the first Contract Year.) Subject to any conditions and fees the Company
may impose, an Owner may elect to have this amount paid in equal periodic
installments ("automatic withdrawals"). The Company reserves the right to charge
a fee for automatic withdrawals. Currently, however, there are no charges for
automatic withdrawals.
Automatic withdrawals are made on the 15th of each month, or any other
monthly date mutually agreed upon (or the next following Valuation Date if the
monthly date is not a Valuation Date). Certain withdrawal penalties may apply to
withdrawals from the Contracts (see "Tax Status -- Tax Treatment of Withdrawals
-- Qualified Contracts" on Page 25 and "Tax Status -- Tax Treatment of
Withdrawals -- Non-Qualified Contracts" on Page 25). Automatic withdrawals are
taken pro rata from Contract Value. The right to a 10% free single sum
withdrawal is forfeited. Automatic withdrawals are not allowed simultaneously
with the Dollar Cost Averaging program. (See "Purchase Payments and Contract
Value -- Dollar Cost Averaging" on Page 16.)
TEXAS OPTIONAL RETIREMENT PROGRAM
A Contract issued to a participant in the Texas Optional Retirement Program
("ORP") will contain an ORP endorsement that will amend the Contract as follows:
A) If for any reason a second year of ORP participation is not begun, the total
amount of the State of Texas' first-year contribution will be returned to the
appropriate institute of higher education upon its request. B) No benefits will
be payable, through surrender of the Contract or otherwise, until the
participant dies, accepts retirement, terminates employment in all Texas
institutions of higher education or attains the age of 70 1/2. The value of the
Contract may, however, be
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transferred to other contracts or carriers during the period of ORP
participation. A participant in the ORP is required to obtain a certificate of
termination from the participant's employer before the value of a Contract can
be withdrawn.
SUSPENSION OF PAYMENTS OR TRANSFERS
The Company reserves the right to suspend or postpone payments (in
Illinois, for a period not exceeding six months) for withdrawals or transfers
for any period when:
(1) the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
(2) trading on the New York Stock Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets; or
(4) when the Company's Annuity Service Center is closed;
(5) during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of Owners; provided that
applicable rules and regulations of the Securities and Exchange
Commission will govern as to whether the conditions described in (2)
and (3) exist.
The Company reserves the right to defer payment for a withdrawal or
transfer from the Fixed Account for the period permitted by law but not for more
than six months after written election is received by the Company.
CONTRACT PROCEEDS
MATURITY PROCEEDS
On the Maturity Date, the Company will pay the Maturity Proceeds of the
Contract to the Annuitant, if living, subject to the terms of the Contract. If
Payment Plan A, Option 1; Plan B; or Plan C are elected, the Maturity Proceeds
will be the Contract Value less any applicable taxes not previously deducted.
(See "Fixed Payment Plans" below.) If the Maturity Proceeds are paid in cash or
by any other method not listed above, the Maturity Proceeds equal the Contract
Value less:
(1) any applicable taxes not previously deducted; less
(2) the Withdrawal Charge, if any; less
(3) the Annual Contract Maintenance Charge, if any.
The election of a Payment Plan must be made in writing at least seven (7)
days prior to the Maturity Date. If no election is made, an automatic option of
monthly income for a minimum of 120 months and as long thereafter as the
Annuitant lives will be applied.
DEATH PROCEEDS
If death occurs prior to the end of the eighth Contract Year, the Death
Proceeds will be the greatest of:
(1) the sum of the Purchase Payments less any withdrawals including any
applicable Withdrawal Charge and any applicable taxes not previously
deducted; or
(2) the Contract Value less any applicable taxes not previously deducted.
If death occurs after the end of the eighth Contract Year, the Death
Proceeds will be the greatest of:
(1) the sum of the Purchase Payments less any withdrawals including any
applicable Withdrawal Charge and less any applicable taxes not
previously deducted; or
(2) the Contract Value less any applicable taxes not previously deducted;
or
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(3) the Contract Value at the end of the eighth Contract Year less any
withdrawals including any applicable Withdrawal Charge incurred since
the end of the eighth Contract Year and any applicable taxes not
previously deducted.
The Death Proceeds will be determined and paid as of the Valuation Period
next following the Valuation Period during which both due proof of death
satisfactory to the Company and an election for the payment method are received
at the Company.
The Beneficiary can elect to have a single lump sum payment or choose one
of the Payment Plans. If a single sum payment is requested, the amount will be
paid within seven (7) days, unless the Suspension of Payments or Transfers
provision is in effect.
Payment to the Beneficiary, other than in a single sum, may only be elected
during the 60-day period beginning with the date of receipt of due proof of
death on a form acceptable to the Company.
The entire Death Proceeds must be paid within five (5) years of the date of
death unless:
(1) the Beneficiary elects to have the Death Proceeds:
(a) payable under a Payment Plan over the life of the Beneficiary or
over a period not extending beyond the life expectancy of the
Beneficiary; and
(b) payable beginning within one year of the date of death; or
(2) if the Beneficiary is the Owner's Spouse, the Beneficiary may elect to
become the Owner of the Contract and the Contract will continue in
effect.
DEATH OF THE ANNUITANT
(1) If the Annuitant dies prior to the Maturity Date, the Company will pay
the Death Proceeds as provided above except as provided in number (2)
below.
(2) If the Annuitant dies prior to the Maturity Date and if the Annuitant
was age 76 or greater on the Issue Date of the Contract, the Company
will pay the Death Proceeds as provided above except that the Death
Proceeds will equal the Contract Value less any applicable taxes not
previously deducted.
(3) If the Annuitant dies after the Maturity Date but before all of the
Proceeds payable under the Contract have been distributed, the Company
will pay the remaining Proceeds to the Beneficiary(ies) according to
the terms of the supplementary contract.
Provision (2) above is inapplicable in Florida.
DEATH OF OWNER
(1) If the Owner dies before the Maturity Date, ownership of the Contract
will be transferred as follows:
(a) if the Owner is also the Annuitant, the Death of the Annuitant
provision described above applies; or
(b) if the Owner is not also the Annuitant and if the new Owner is the
spouse of the Owner, the Contract may be continued; or
(c) if the Owner is not also the Annuitant and if the new Owner is
someone other than the spouse of the Owner, the Contract Withdrawal
Value must be distributed pursuant to the Death Proceeds provision
above.
(2) If the Owner dies on or after the Maturity Date, but before all
Proceeds payable under the Contract have been distributed, the Company
will continue payments according to the terms of the supplementary
contract.
The Owner's spouse is the Owner's surviving spouse at the time of the
Owner's death. If the Owner is not a natural person, the death of the Annuitant
will be treated as the death of the Owner. If there are Joint Owners, any
references to the death of the Owner shall mean the first death of an Owner.
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FIXED PAYMENT PLANS
After the first Contract Year, the Proceeds may be applied under one or
more of the Payment Plans described below. Payment Plans not specified in the
Contract are available only if they are approved both by the Company and the
Owner. The Owner chooses a Payment Plan during the Annuitant's lifetime. This
choice can be changed during the life of the Annuitant prior to the Maturity
Date. If the Owner has not chosen a plan prior to the Annuitant's death, the
automatic option of monthly income for a minimum of 120 months and as long
thereafter as the Payee lives will be applied.
The Owner chooses a plan by sending a written request to the Annuity
Service Center. The Company will send the Owner the proper forms to complete.
The request, when recorded at the Company's Annuity Service Center, will be in
effect from the date it was signed, subject to any payments or actions taken by
the Company before the recording. Any change must be requested at least seven
(7) days prior to the Maturity Date. If, for any reason, the person named to
receive payments (the Payee) is changed, the change will go into effect when the
request is recorded at the Company's Annuity Service Center, subject to any
payments or actions taken by the Company before the recording.
No Withdrawal Charge is deducted if Plan A-Option 1; Plan B or Plan C is
elected.
A plan is available only if the periodic payment is $100 or more. If the
Payee is other than a natural person (such as a corporation), a plan will be
available only with the Company's consent.
A supplementary contract will be issued in exchange for the Contract when
payment is made under a Payment Plan. The effective date of a Payment Plan shall
be a date upon which the Company and the Owner mutually agree.
The minimum interest rate for plans A and B is 3.0% a year, compounded
yearly. The minimum rates for Plan C were based on the 1983a Annuity Table at
3.0% interest, compounded yearly. The Company may pay a higher rate at its
discretion.
PLAN A. INTEREST
OPTION 1 -- The Contract Value less any applicable taxes not previously
deducted may be left on deposit with the Company for five (5) years. Fixed
payments will be made monthly, quarterly, semi-annually, or annually. The
Company does not allow a monthly payment if the Contract Value applied under
this option is less than $100,000. The Proceeds may not be withdrawn until the
end of the five (5) year period.
OPTION 2 -- The Contract Withdrawal Value may be left on deposit with the
Company for a specified period. Interest will be paid annually. All or part of
the Proceeds may be withdrawn at any time.
PLAN B. FIXED PERIOD
The Contract Value less any applicable taxes not previously deducted will
be paid until the Proceeds, plus interest, are paid in full. Payments may be
paid annually or monthly. The payment period cannot be more than thirty (30)
years nor less than five (5) years. The Contract provides for a table of minimum
annual payments. They are based on the Age of the Annuitant or the Beneficiary.
PLAN C. LIFE INCOME
The Contract Value less any applicable taxes not previously deducted will
be paid in monthly or annual payments for as long as the Annuitant or
Beneficiary, whichever is appropriate, lives. The Company has the right to
require proof satisfactory to it of the Age and sex of such person and proof of
continuing survival of such person. A minimum number of payments may be
guaranteed, if desired. The Contract provides for a table of minimum annual
payments. They are based on the Age of the Annuitant or the Beneficiary.
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DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("Securities Network"), 604
Locust Street, Des Moines, Iowa 50309, acts as the distributor of the Contracts.
Securities Network is also a wholly-owned subsidiary of Equitable of Iowa
Companies. The Contracts are offered on a continuous basis.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO
From time to time, the Company may advertise the "yield" and "effective
yield" of the Money Market Subaccount of the Separate Account. Both yield
figures are based on historical earnings and are not intended to indicate future
performance. The "yield" of the Money Market Subaccount refers to the income
generated by Contract Values in the Money Market Subaccount over a seven-day
period (which period will be stated in the advertisement). This income is
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the Contract Values in the Money Market Subaccount. The
"effective yield" is calculated similarly. However, when annualized, the income
earned by Contract Values is assumed to be reinvested. This results in the
"effective yield" being slightly higher than the "yield" because of the
compounding effect of the assumed reinvestment. The yield figure will reflect
the deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charge, but will not reflect the deduction of any Withdrawal Charge.
The deduction of any Withdrawal Charge would reduce any percentage increase or
make greater any percentage decrease.
OTHER PORTFOLIOS
From time to time, the Company may advertise performance data for the
various other Portfolios under the Contract. Such data will show the percentage
change in the value of an Accumulation Unit based on the performance of an
investment medium over a period of time, usually a calendar year, determined by
dividing the increase (decrease) in value for that Unit by the Accumulation Unit
value at the beginning of the period. This percentage figure will reflect the
deduction of any asset-based charges and any applicable Annual Contract
Maintenance Charges under the Contracts, but will not reflect the deduction of
any Withdrawal Charge. The deduction of any Withdrawal Charge would reduce any
percentage increase or make greater any percentage decrease.
Any advertisement will also include total return figures calculated as
described in the Statement of Additional Information. The total return figures
reflect the deduction of any applicable Annual Contract Maintenance Charge and
Withdrawal Charges, as well as any asset-based charges.
The Company may make available yield information with respect to some of
the Portfolios. Such yield information will be calculated as described in the
Statement of Additional Information. The yield information will reflect the
deduction of any applicable Annual Contract Maintenance Charge as well as any
asset-based charges.
The Company may also show historical Accumulation Unit values in certain
advertisements containing illustrations. These illustrations will be based on
actual Accumulation Unit values.
In addition, the Company may distribute sales literature which compares the
percentage change in Accumulation Unit values for any of the Portfolios against
established market indices such as the Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average or other management investment
companies which have investment objectives similar to the Portfolio being
compared. The Standard & Poor's 500 Composite Stock Price Index is an unmanaged,
unweighted average of 500 stocks, the majority of which are listed on the New
York Stock Exchange. The Dow Jones Industrial Average is an unmanaged, weighted
average of thirty blue chip industrial corporations listed on the New York Stock
Exchange. Both the Standard & Poor's 500 Composite Stock Price Index and the Dow
Jones Industrial Average assume quarterly reinvestment of dividends.
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In addition, the Company may, as appropriate, compare each Subaccount's
performance to that of other types of investments such as certificates of
deposit, savings accounts and U.S. Treasuries, or to certain interest rate and
inflation indices, such as the Consumer Price Index, which is published by the
U.S. Department of Labor and measures the average change in prices over time of
a fixed "market basket" of certain specified goods and services. Similar
comparisons of Subaccount performance may also be made with appropriate indices
measuring the performance of a defined group of securities widely recognized by
investors as representing a particular segment of the securities markets. For
example, Subaccount performance may be compared with Donoghue Money Market
Institutional Averages (money market rates), Lehman Brothers Corporate Bond
Index (corporate bond interest rates) or Lehman Brothers Government Bond Index
(long-term U.S. Government obligation interest rates).
The Company may also distribute sales literature which compares the
performance of the Accumulation Unit values of the Contracts issued through the
Separate Account with the unit values of variable annuities issued through the
separate accounts of other insurance companies. Such information will be derived
from the Lipper Variable Insurance Products Performance Analysis Service, the
VARDS Report or from Morningstar.
The Lipper Variable Insurance Products Performance Analysis Service is
published by Lipper Analytical Services, Inc., a publisher of statistical data
which currently tracks the performance of almost 4,000 investment companies. The
rankings compiled by Lipper may or may not reflect the deduction of asset-based
insurance charges. The Company's sales literature utilizing these rankings will
indicate whether or not such charges have been deducted. Where the charges have
not been deducted, the sales literature will indicate that if the charges had
been deducted, the ranking might have been lower.
The VARDS Report is a monthly variable annuity industry analysis compiled
by Variable Annuity Research & Data Service of Roswell, Georgia and published by
Financial Planning Resources, Inc. The VARDS rankings may or may not reflect the
deduction of asset-based insurance charges. The Company's sales literature
utilizing these rankings will indicate whether or not such charges have been
deducted. Where the charges have not been deducted, the sales literature will
indicate that if the charges had been deducted, the ranking might have been
lower.
Morningstar rates a variable annuity subaccount against its peers with
similar investment objectives. Morningstar does not rate any subaccount that has
less than three years of performance data. The Company's sales literature
utilizing these rankings will indicate whether charges have been deducted. Where
the charges have not been deducted, the sales literature will indicate that if
the charges had been deducted, the ranking might have been lower.
TAX STATUS
GENERAL
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON THE COMPANY'S UNDERSTANDING
OF CURRENT FEDERAL INCOME TAX LAW APPLICABLE TO ANNUITIES IN GENERAL. THE
COMPANY CANNOT PREDICT THE PROBABILITY THAT ANY CHANGES IN SUCH LAWS WILL BE
MADE. PURCHASERS ARE CAUTIONED TO SEEK COMPETENT TAX ADVICE REGARDING THE
POSSIBILITY OF SUCH CHANGES. THE COMPANY DOES NOT GUARANTEE THE TAX STATUS OF
THE CONTRACTS. PURCHASERS BEAR THE COMPLETE RISK THAT THE CONTRACTS MAY NOT BE
TREATED AS "ANNUITY CONTRACTS" UNDER FEDERAL INCOME TAX LAWS. IT SHOULD BE
FURTHER UNDERSTOOD THAT THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE AND THAT
SPECIAL RULES NOT DESCRIBED IN THIS PROSPECTUS MAY BE APPLICABLE IN CERTAIN
SITUATIONS. MOREOVER, NO ATTEMPT HAS BEEN MADE TO CONSIDER ANY APPLICABLE STATE
OR OTHER TAX LAWS.
Section 72 of the Code governs taxation of annuities in general. An Owner
is not taxed on increases in the value of a Contract until distribution occurs,
either in the form of a lump sum payment or as annuity payments under the
Annuity Option selected. For a lump sum payment received as a total withdrawal
(total surrender), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the purchase payments, while for Qualified Contracts there
may be no cost basis. The taxable portion of the lump sum payment is taxed at
ordinary income tax rates.
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For annuity payments, a portion of each payment in excess of an exclusion
amount is includible in taxable income. The exclusion amount for payments based
on a fixed annuity option is determined by multiplying the payment by the ratio
that the cost basis of the Contract (adjusted for any period certain or refund
feature) bears to the expected return under the Contract. Payments received
after the investment in the Contract has been recovered (i.e. when the total of
the excludible amounts equal the investment in the Contract) are fully taxable.
The taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
The Company is taxed as a life insurance company under the Code. For
federal income tax purposes, the Separate Account is not a separate entity from
the Company and its operations form a part of the Company.
DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer".
The Company intends that all Portfolios of the Trust underlying the
Contracts will be managed by the investment adviser for the Trust in such a
manner as to comply with these diversification requirements.
The Treasury Department has indicated that the diversification Regulations
do not provide guidance regarding the circumstances in which Owner control of
the investments of the Separate Account will cause the Owner to be treated as
the owner of the assets of the Separate Account, thereby resulting in the loss
of favorable tax treatment for the Contract. At this time it cannot be
determined whether additional guidance will be provided and what standards may
be contained in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of the separate account. It is unknown
whether these differences, such as the Owner's ability to transfer among
investment choices or the number and type of investment choices available, would
cause the Owner to be considered as the owner of the assets of the
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Separate Account resulting in the imposition of federal income tax to the Owner
with respect to earnings allocable to the Contract prior to receipt of payments
under the Contract.
In the event any forthcoming guidance or ruling is considered to set forth
a new position, such guidance or ruling will generally be applied only
prospectively. However, if such ruling or guidance was not considered to set
forth a new position, it may be applied retroactively resulting in the Owner
being retroactively determined to be the owner of the assets of the Separate
Account.
Due to the uncertainty in this area, the Company reserves the right to
modify the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are
issued within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includible in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in most cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.
Effective January 1, 1993, certain distributions from retirement plans
qualified under Section 401 or Section 403(b) of the Code, which are not
directly rolled over to another eligible retirement plan or individual
retirement account or individual retirement annuity, are subject to a mandatory
20% withholding for Federal income tax. The 20% withholding requirement does not
apply to: a) distributions for the life or life expectancy of the participant or
joint and last survivor expectancy of the participant and a designated
beneficiary; or b) distributions for a specified period of 10 years or more; or
c) distributions which are required minimum distributions. Participants should
consult their own tax counsel or other tax advisor regarding withholding.
TAX TREATMENT OF WITHDRAWALS -- NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includible in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any distribution. However, the penalty is not imposed on amounts received: (a)
after the taxpayer reaches age 59 1/2; (b) after the death of the Owner; (c) if
the taxpayer is totally disabled (for this purpose disability is as defined in
Section 72(m)(7) of the Code); (d) in a series of substantially equal periodic
payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or for the joint lives (or joint life expectancies)
of the taxpayer and his or her Beneficiary; (e) under an immediate annuity; or
(f) which are allocable to purchase payments made prior to August 14, 1982.
The Contract provides that upon the death of the Annuitant prior to the
Maturity Date, the Death Proceeds will be paid to the named Beneficiary. Such
payments made upon the death of the Annuitant who is not the Owner of the
Contract do not qualify for the death of Owner exception described above, and
will be
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subject to the ten (10%) percent distribution penalty unless the Beneficiary is
59 1/2 years old or one of the other exceptions to the penalty applies.
The above information does not apply to Qualified Contracts. However,
separate tax withdrawal penalties and restrictions may apply to such Qualified
Contracts. (See "Tax Treatment of Withdrawals -- Qualified Contracts", below.)
QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for
use under various types of qualified plans. Generally, participants in a
qualified plan are not taxed on increases to the value of the contributions to
the plan until distribution occurs, regardless of whether the plan assets are
held under an annuity contract. Taxation of participants in each qualified plan
varies with the type of plan and terms and conditions of each specific plan.
Owners, Annuitants and Beneficiaries are cautioned that benefits under a
qualified plan may be subject to the terms and conditions of the plan regardless
of the terms and conditions of the Contracts issued pursuant to the plan. Some
retirement plans are subject to distribution and other requirements that are not
incorporated into the Company's administrative procedures. Owners, participants
and Beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts comply with
applicable law. Following are general descriptions of the types of qualified
plans with which the Contracts may be used. Such descriptions are not exhaustive
and are for general informational purposes only. The tax rules regarding
qualified plans are very complex and will have differing applications depending
on individual facts and circumstances. Each purchaser should obtain competent
tax advice prior to purchasing a Contract issued under a qualified plan.
Contracts issued pursuant to qualified plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to qualified plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals -- Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee
v. Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by the Company in connection with
certain Qualified Plans will utilize annuity tables which do not differentiate
on the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
a. H.R. 10 Plans
Section 401 of the Code permits self-employed individuals to establish
Qualified Plans for themselves and their employees, commonly referred to as
"H.R. 10" or "Keogh" plans. Contributions made to the Plan for the benefit
of the employees will not be included in the gross income of the employees
until distributed from the Plan. The tax consequences to participants may
vary depending upon the particular plan design. However, the Code places
limitations and restrictions on all Plans including on such items as:
amount of allowable contributions; form, manner and timing of
distributions; transferability of benefits; vesting and nonforfeitability
of interests; nondiscrimination in eligibility and participation; and the
tax treatment of distributions, withdrawals and surrenders. (See "Tax
Treatment of Withdrawals -- Qualified Contracts" below.) Purchasers of
Contracts for use with an H.R. 10 Plan should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
b. Tax-Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and
scientific organizations described in Section 501(c)(3) of the Code. These
qualifying employers may make contributions to the Contracts for the
benefit of their employees.
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Such contributions are not includible in the gross income of the employees
until the employees receive distributions from the Contracts. The amount of
contributions to the tax-sheltered annuity is limited to certain maximums
imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals --
Qualified Contracts" below.) Any employee should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
c. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement
Annuity" ("IRA"). Under applicable limitations, certain amounts may be
contributed to an IRA which will be deductible from the individual's gross
income. These IRAs are subject to limitations on eligibility,
contributions, transferability and distributions. (See "Tax Treatment of
Withdrawals -- Qualified Contracts" below.) Under certain conditions,
distributions from other IRAs and other Qualified Plans may be rolled over
or transferred on a tax-deferred basis into an IRA. Sales of Contracts for
use with IRAs are subject to special requirements imposed by the Code,
including the requirement that certain informational disclosure be given to
persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax
advice as to the tax treatment and suitability of such an investment.
d. Corporate Pension and Profit-Sharing Plans
Sections 401(a) and 401(k) of the Code permit corporate employers to
establish various types of retirement plans for employees. These retirement
plans may permit the purchase of the Contracts to provide benefits under
the Plan. Contributions to the Plan for the benefit of employees will not
be includible in the gross income of the employees until distributed from
the Plan. The tax consequences to participants may vary depending upon the
particular plan design. However, the Code places limitations and
restrictions on all plans including on such items as: amount of allowable
contributions; form, manner and timing of distributions; transferability of
benefits; vesting and nonforfeitability of interests; nondiscrimination in
eligibility and participation; and the tax treatment of distributions,
withdrawals and surrenders. (See "Tax Treatment of Withdrawals -- Qualified
Contracts" below.) Purchasers of Contracts for use with Corporate Pension
or Profit-Sharing Plans should obtain competent tax advice as to the tax
treatment and suitability of such an investment.
TAX TREATMENT OF WITHDRAWALS -- QUALIFIED CONTRACTS
In the case of a withdrawal under a Qualified Contract, a ratable portion
of the amount received is taxable, generally based on the ratio of the
individual's cost basis to the individual's total accrued benefit under the
retirement plan. Special tax rules may be available for certain distributions
from a Qualified Contract. Section 72(t) of the Code imposes a 10% penalty tax
on the taxable portion of any distribution from qualified retirement plans,
including Contracts issued and qualified under Code Sections 401 (H.R. 10 and
Corporate Pension and Profit-Sharing Plans), 403(b) (Tax-Sheltered Annuities)
and 408(b) (Individual Retirement Annuities). To the extent amounts are not
includible in gross income because they have been rolled over to an IRA or to
another eligible qualified plan, no tax penalty will be imposed. The tax penalty
will not apply to the following distributions: (a) if distribution is made on or
after the date on which the Owner or Annuitant (as applicable) reaches age
59 1/2; (b) distributions following the death or disability of the Owner or
Annuitant (as applicable) (for this purpose disability is as defined in Section
72(m)(7) of the Code); (c) after separation from service, distributions that are
part of substantially equal periodic payments made not less frequently than
annually for the life (or life expectancy) of the Owner or Annuitant (as
applicable) or the joint lives (or joint life expectancies) of such Owner or
Annuitant (as applicable) and his or her designated Beneficiary; (d)
distributions to an Owner or Annuitant (as applicable) who has separated from
service after he has attained age 55; (e) distributions made to the Owner or
Annuitant (as applicable) to the extent such distributions do not exceed the
amount allowable as a deduction under Code Section 213 to the Owner or Annuitant
(as applicable) for amounts paid during the taxable year for medical care; and
(f) distributions
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made to an alternate payee pursuant to a qualified domestic relations order. The
exceptions stated in (d), (e) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in (c) above applies to an
Individual Retirement Annuity without the requirement that there be a separation
from service.
Generally, distributions from a qualified plan must commence no later than
April 1 of the calendar year, following the year in which the employee attains
age 70 1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required minimum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year may be
subject to an additional 15% excise tax unless an exemption applies.
TAX-SHELTERED ANNUITIES -- WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Generally, investment earnings on premiums for the Contracts will be taxed
currently to the Owner if the Owner is a non-natural person, e.g., a
corporation, or certain other entities other than tax-qualified trusts. Such
Contracts generally will not be treated as annuities for federal income tax
purposes.
FINANCIAL STATEMENTS
Financial statements of the Company and the Separate Account have been
included in the Statement of Additional Information.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Separate
Account, the Distributor or the Company is a party.
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TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM PAGE
---- -----
<S> <C>
Company.............................................................................. 3
Experts.............................................................................. 3
Legal Opinions....................................................................... 3
Distributor.......................................................................... 3
Yield Calculation for Money Market Subaccount........................................ 3
Performance Information.............................................................. 4
Annuity Provisions................................................................... 6
Financial Statements................................................................. 6
</TABLE>
29
